Property owner says there's no deal for McCormick hotel land

February 19, 2013|By Kathy Bergen | Tribune staff reporter

An artist rendering of the 1,200-room hotel proposed near McCormick Place. (Handout)

The agency that owns McCormick Place announced Tuesday morning that it will build a second hotel near the convention center complex, but now it appears the plan faces a significant hurdle before it could come to fruition.

The Metropolitan Pier and Exposition Authority, also known as McPier, said it is acquiring land for a 1,200-room convention hotel, which would cost $400 million to build. The hotel would be located immediately west of the convention center's newest facility, the West Building. A skywalk would connect the two.

But JRM Technology, the property owner, already has invested thousands of man hours and millions of dollars to develop a $400 million data center" at the site, James R. McHugh, principal of the company, said in a statement issued Tuesday afternoon.

"That plan has already received City Council approval and we would start construction as soon as a building permit is issued," he said.

Though McPier "approached us about an alternative location for this project, we considered those conversations to be very preliminary and no agreement has been reached," McHugh said. "It is our hope that the issue can be resolved in a way that improves the ongoing redevelopment of the South Loop."

Jim Reilly, CEO of McPier, the state-city agency that owns McCormick Place, on Tuesday morning had expressed optimism that the talks would lead to a deal.

"We think that will work out," he said. "If for some reason it doesn't, the city is prepared to use its eminent domain power. But we hope we won't have to do that."

Chicago Deputy Mayor Steve Koch said the project is moving forward.

"We are in active negotiations with McHugh and there are a number of options that will allow both the data center and world-class hotel to be built," he said in a written statement. "However, the city will pursue every available option to ensure that the hotel is built, and brings with it essential redevelopment around McCormick Place."

Reilly declined to comment on the potential deal cost, but said it would be a fraction of the construction cost. McPier and the site owners are discussing the possibility of a land swap, in which McPier would trade some land it owns on a nearby block.

The McPier proposal comes as key parcels just north of the West Building are moving toward auction. Those sites have been viewed as potential locations for more hotels and entertainment, and possibly an arena for DePaul University's Blue Demons basketball team.

Reilly declined to comment on where things stand in talks with DePaul. But he said McPier's latest hotel proposal would not stand in the way of other hotels being developed nearby, noting a 2009 study found potential demand for up to 8,000 hotel rooms in the area. The area will need some lower priced options too, he said.

"I don't see this as competing (with other projects), he said. "This will give us 2,400 rooms, and we could easily use more than 2,400 rooms."

McPier owns the 800-room McCormick Place Hyatt Regency, which is undergoing a 460-room expansion due to be completed this summer at a cost of nearly $90 million.

The two hotels will operate cooperatively, McPier said.

The latest project, to be between Indiana and Michigan, along the south side of Cermak, was announced jointly with Mayor Rahm Emanuel and Gov. Pat Quinn. Both said, in prepared statements, that the project would stimulate the local economy and make the city more competitive in the race for trade shows.

McPier will immediately seek proposals from design/build teams, hotel operators, and financial advisers and underwriters, Reilly said. Construction should begin in the last quarter of 2014, with completion set for the end of 2016, he said.

As it did with its first hotel, McPier intends to finance the project in the construction phase through revenue bonds that would be paid back by hotel operating proceeds. At a later stage, it may add more financing through its expansion project debt structure, in which bonds are paid back with tourism taxes.

The hotel will have a Michigan Avenue address, which will connect it to the downtown in visitors' minds, and which should help foster entertainment development in the surrounding neighborhood, a historic strip known as Motor Row, Reilly said.

"I have long said I want there to be nightlife (in the area)," he said.

The hotel also would be two blocks from a planned new station on the CTA's green line, which should add to its appeal, he said.